Insurance is a legal agreement where insurers agree to protect the insured against unexpected losses, in exchange for a premium. It involves distributing the risk from one to many.
Insurance has been in existence for almost a century in Bangladesh, dating back to the time of British rule in India. During this period, several insurance companies began conducting both life and general insurance operations in Bengal. The insurance industry gained momentum in East Pakistan between 1947 and 1971, with a total of 49 insurance companies offering various life and general insurance schemes. These companies had diverse origins, including British, Australian, Indian, West Pakistani, and local backgrounds.
There were a total of 37 insurance companies in East and West Pakistan, with 10 based in East Pakistan and 27 in West Pakistan. The remaining companies were located elsewhere around the world. Most of these companies operated as limited liability entities, with some focusing on specific industries and others involved in multiple sectors. However, in 1972, the Government of Bangladesh took control of the insurance industry by enacting the Bangladesh Insurance (Nationalization) Order 1972.
Under this order, all 49 insurance companies and organizations conducting insurance business in the country, except for postal life insurance and foreign life insurance companies, were placed in the public sector. They were organized into five corporations: Jatiya Bima Corporation, Tista Bima Corporation, Karnafuli Bima Corporation, Rupsa Jiban Bima Corporation, and Surma Jiban Bima Corporation.
The Jatiya Bima Corporation was responsible for overseeing and managing the operations of other insurance corporations in Bangladesh. These other corporations were divided into categories, with Tista and Karnafuli Bima Corporations handling general insurance and Rupsa and Surma focusing on life insurance. Life insurance companies either operated independently as Rupsa or Surma, or as a part of a larger composite company. Similarly, general insurance companies operated independently as Tista or Karnafuli, or as a part of a composite company.
After 1973, the Sadharan Bima Corporation took over the general insurance business, while the Jiban Bima Corporation, American Life Insurance Company (ALICO), and Postal Life Insurance Department carried out the life insurance business. This continued until 1994 when changes were made to adapt to the liberalization trend in Bangladesh’s economy. Private sector insurance companies requested the removal of restrictions to allow them to compete with the Sadharan Bima Corporation in underwriting both public and private sector insurance business.
The selection of reinsurers in Bangladesh has had an impact on the effectiveness of reinsurance. In 1990, the Government of Bangladesh made amendments to the Insurance Corporations Act, which allowed private sector insurance companies to underwrite half of the insurance business from the public sector and allocate up to 50% of their reinsurance with any chosen reinsurer, whether domestic or international. The Sadharan Bima Corporation is responsible for placing the remaining reinsurance.
The origins of insurance can be dated back to the 12th or 13th century with the introduction of Marine insurance in Northern Italy. However, it was not until the late 17th century that a more organized structure emerged within the industry, marked by the establishment of Lloyds Insurance Company in the United Kingdom. In this period, London’s coffee houses played a vital role as gathering spots for merchants and traders engaged in business transactions, fostering trade and commerce.
Edward Lloyd established a coffee house in 1680, which later developed into the renowned Lloyds Insurance Company of the UK. In India, insurance companies emerged during British rule and maintained affiliations with British, Australian, and Indian entities. Following independence in 1972, the Bangladesh government nationalized the insurance industry under the Bangladesh Insurance (Nationalization) Order 1972. Presently, there are 60 insurance companies operating in Bangladesh: 57 are privately owned, two are state-owned, and one is foreign-owned. The Ministry of Commerce oversees the insurance sector in the country via the Insurance Directorate. Jiban Bima Corporation and Sadharan Bima Corporation both represent government-owned insurance firms in Bangladesh.